0
$\begingroup$

If a market maker is required to always have at least one order on a certain side of the order book (buy or sell), if there's no one else in the market and just market makers left on the book, will they just automatically trade shares then? Or are the "orders" placed in the book by market makers some special kind of order that doesn't actually get executed?

$\endgroup$
  • $\begingroup$ If market maker A is willing to buy at 10 and sell at 11, and market maker B is also willing to buy at 10 and sell at 11, why would shares "automatically trade" ? Who would buy/sell to whom? As long as the bid/asks don't cross nothing will trade. $\endgroup$ – noob2 Jan 23 at 18:16
  • $\begingroup$ Learn about limit orders and market orders. Normal limit orders don't actually get executed most of the time. $\endgroup$ – user253751 Jan 23 at 19:02
2
$\begingroup$

Owen, designated market makers in general are required to send in a two sided market (a bid and and offer) within a certain width for a certain percentage of the time. There's no obligation to cross the market and actually trade.

Also, many people who self-identify as market-markers are not really designated by any exchange and have no obligation even to make a two sided market. In that case the term "market-maker" refers just to the style of passive and continuous trading.

| improve this answer | |
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.